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Evaluate rituals with eye to profitability
They still graze in and around your agency, but an increasing number of home health managers are starting to look critically at "sacred cows" that need to be put out to pasture. Sacred cows are rituals, beliefs, or guidelines that are routinely followed without anyone really questioning the origin or even the appropriateness of the belief.
"The home health industry is even more reluctant to let go of some practices than other home-care-related industries, such as infusion or durable medical equipment," says Dexter Braff, MBA, MS, president of The Braff Group, a health care mergers and acquisitions firm based in Pittsburgh. "The fundamental difference between home health and the other two industries is that home health grew under a cost-based reimbursement plan," he says. "Home health managers and staff members developed a way of doing business that fostered an attitude that is still hard to shake," Braff explains.
The first and most obvious sacred cow for home health is the belief that profit is a dirty word, Braff says. "As an industry, home health representatives are embarrassed to talk about profits, as if making a profit equates to giving less-than-quality service," Braff says. In fact, under the cost-based reimbursed system, many extra costs were generated in the name of quality when the reality was that extra services did not always translate to extra quality, he adds. "Today, people are still receiving quality care, even though agencies are having to find innovative ways to become more efficient," he explains. "Even if you are a not-for-profit agency, you still need to generate profits to continue providing services and have a reason to be in business," Braff points out.
Managers who are uncomfortable with the idea of generating profits can think of the profit as a surplus that can be used to provide other patients services, he suggests.
The best way to overcome the idea that profit is a dirty word is to run monthly financial statements in which you can see the earnings you generate, your contribution to the organization’s bottom line, and the surplus you provide to support not-for-profit or free services to underserved patients, Braff recommends. "If your agency is not making money, you are not operating efficiently and need to evaluate changes that will improve your efficiency," he says.
Private duty always the answer?
"We can protect ourselves from the risk of decreasing Medicare reimbursement by going into private duty is another belief that may or may not be right for your agency," Braff says. "While private duty is a good business strategy for some, it is very difficult to succeed when you offer both Medicare and private-duty services," he says.
Although the initial response is that resources can be used for both sides of the business, this is not accurate, Braff points out. "You use different types of caregivers and different billing systems, so you can’t blend all services," he says. "It’s the same with agencies that believe the same staff can be used to provide hospice, pediatric, and private duty services," Braff adds. "You have specialized nursing for hospice, geriatric, and pediatric patients, so you aren’t saving on staff costs because you still need the specialists."
Another cow that needs to be pastured is the idea that home health agencies can reap the benefits of economy of scale as they add new patients, he says. "The economy-of-scale theory works well in many industries but not in home health because there are virtually no fixed costs in home health," Braff says. "Agency managers misidentify costs by assuming that administration, billing, and nurse supervisors are fixed costs," he says. "In reality, they are step-variable costs, which means that I don’t need to add another billing clerk or another nurse supervisor for one new patient, but I will for 100 new patients," he explains.
For this reason, managers need to know exactly where they will need to increase resources to add new patients so that they can accurately predict costs and profits, Braff says.
"This is especially critical for agencies that negotiate managed care contracts," he adds. "If a new contract might mean 100 new patients, be sure that you know exactly how much you will have to spend to care for those patients before you sign the contract and agree to a price that leaves you no margin for profit," he says.
Reluctance to invest in tech
"Another leftover belief from the days of cost-based reimbursement is that some home health managers are reluctant to invest in technology for which the government doesn’t pay," Braff says. While many agency managers get the concept of the need for technology, they are not ready to make the leap, he adds.
The most effective technology for agency managers to consider is anything that cuts down on processing information, automates OASIS (Outcome Assessment and Information Set), or decreases the amount of time to get the initial request for anticipated payment (RAP), he says.
"We cut our administrative costs by 30% because we didn’t have to input the data from paper forms, we reduced the mileage reimbursement for our nurses because they didn’t have to return to the office each day, and our cash flow improved because we cut 15 days off the time it took to receive our RAP," says Mark O’Brien, owner of Texas Senior Care of Dallas. He’s describing the results of automating his agency with hand-held computers for all of his field nurses.
Hand-held computers one agency’s choice
"We chose hand-held computers rather than laptops because they are very inexpensive and don’t require a staff person to maintain them," O’Brien says. "They are much easier for nurses to carry, especially when climbing stairs and carrying other supplies," he adds. "Not only are the forms legible, but the software doesn’t allow conflicting information to be entered on the OASIS form," O’Brien continues. "For example, if a nurse indicates that the patient can be taught to perform certain care activities, then later describes the patient as having dementia, the software does not enable the nurse to proceed until the inconsistency is resolved," he says. This inconsistency is a mistake that would delay payment while the mistake was identified and resolved with paper forms, O’Brien says.
While home health employees tend to be more motivated by caring for people rather than making money, there is a shift in home health with more business-oriented people taking management positions, Braff adds. "We now look at home health not as a clinical service, but as a business that provides clinical service," he says.
For more information, contact:
• Dexter Braff, MBA, MS, President, The Braff Group, 1665 Washington Road, Suite 3, Pittsburgh, PA 15228. Telephone: (888) 922-5169 or (412) 833-5733. Fax: (412) 833-3143. Web site: www.thebraffgroup.com.
• Mark O’Brien, Owner, Texas Senior Care, 13400 U.S. Highway 42, Suite 290, Prospect, KY 40059. Telephone: (502) 228-9698. E-mail: email@example.com.